Act 73 creates voter-approved supplemental district spending with state recapture; JFO outlines mechanics

Julia Richter, Joint Fiscal Office staff, briefed the committee on Supplemental District Spending (SDS), a mechanism in Act 73 that allows school districts to ask voters for local spending above the foundation formula. Richter said SDS would permit local supplemental spending up to 5% of the district’s long-term membership multiplied by the base amount (with a transition period allowing larger percentages initially).

Richter described how the SDS tax would be imposed: a supplemental district tax rate is equalized across the state and corresponds to the district with the lowest property wealth per pupil; wealthier districts that raise more than the equalized amount will have the excess recaptured and placed into a supplemental district spending reserve. Act 73 directs that reserve’s use the following year to lower property tax rates statewide.

Committee members asked why a district would choose to raise SDS if the foundation formula and categorical aid are in place. Richter said districts may identify specific needs or one-time costs beyond the foundation base. Members raised equity and transition concerns: some districts currently spend far above the foundation level and could face cuts; JFO said the law includes a transition mechanism (an early-period allowance as high as 10% that phases down to 5%) and that appeals rules exist in Act 73 though some legal/administrative details will require follow-up.

Why this matters: SDS changes the balance between statewide base funding and local voter discretion, introduces a statewide equalization/recapture mechanism, and establishes a reserve intended to moderate tax-rate impacts. Members asked for further modeling of how SDS would operate under current district configurations and for clarifications about which property classes are taxed for SDS.